Thailand’s Cosmetics and Beauty Products Industry

Opportunities for International Business

January 2017
World Business Advisory Center
World Business Division
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Executive Summary
Thailand is
the largest market for cosmetics in the ASEAN’s manufacturing base for
ASEAN with USD 4 billion market value. cosmetics with USD 400 million export value.

among the fastest growing market in the blessed with local herbs could be turned
world with 8% to 10% annual growth rate. into more than 200,000 cosmetic ingredients.

Thailand’s Cosmetics and Beauty Products Industry – Business Opportunities

Market Opportunities: Investment Opportunities:

• Engage in trading activities • Engage in cosmetic manufacturing

• Engage in retail and marketing activities • Co-develop products with local firms
• Collaborate with local distributors/ • Use Thailand as OEM hub
retailers • Source raw materials locally
• Expand into ASEAN market
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Table of Content

Thailand’s Cosmetics and Beauty Products Industry - Overview

Market Opportunities

Investment Opportunities

KASIKORNBANK’s Support

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Table of Content

Thailand’s Cosmetics and Beauty Products Industry - Overview

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Thailand’s Cosmetics and Beauty Products Industry - Overview

With rapidly growing market, Thailand has become ASEAN’s beauty hub with tremendous business potential throughout the value
chain, ranging from manufacturing, importing, distribution to retail business.

Thailand’s Cosmetics and Beauty Products Industry – Value Chain

1 3 Retailing
4 End Users

Department Store
Thai
Cosmetics Manufacturers Customers
Specialty Store
in Thailand

Supermarket

Foreign
2 Hypermarket Tourists

Importers of Cosmetics
and Beauty products
2 Distributors
Convenience store

E-commerce
Spa & Salon

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(1) Cosmetics and Beauty Product Manufacturers in Thailand
Thailand has been manufacturing base for international brands for over 40 years; Considerable market size and availability of raw
materials have contributed to formation of a robust supply chain with established local brands and a wide spectrum OEM manufacturers.

3 Types of Manufacturers in Thailand

Global Manufacturers in
1 Thailand 2 Local Brand Manufacturers 3 Local OEM Manufacturers

Several local brand manufacturers are
Many global manufacturers also have set up
successful launching cosmetics in not only
their subsidiaries in Thailand such as
Thailand but also many ASEAN countries e.g.
Beiersdorf (Nivea and Eucerin), Kao (Biore).
Cambodia, Laos, Indonesia.
There are approximately 2,000 cosmetic OEM
manufacturers in Thailand. Most of them are
SMEs, eager to grow locally and in regional
market.
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(2) Importers and Distributors of Cosmetics and Beauty Products

Usually, foreign brands distribute their products by import subsidiaries, authorized distributors, or SME’s distributors; The larger brands
prefer setting up import subsidiary or appointing authorized distributors, whereas smaller brands would use SME’s distributors.

3 Types of Importers and Distributors in Thailand

1 Import Subsidiaries of
international brands
Handle only own brand group products
 100% Foreign owned subsidiaries e.g
Loreal (Thailand), ELCA (Thailand), LVMH
Perfumes and Cosmetics (Thailand)
 JV with local firms e.g. Shiseido (Thailand)
Kanebo Cosmetics (Thailand)
2 Authorized distributors
3 SME’s Importers &
Distributors
Thai companies handle various brands Numerous local SME companies
products eg. Central Marketing Group handle various Thai and foreign brands
(Clarins, H2O), Minor International PLC products.
(Red Earth, Laneige).

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(3) Retailing of Cosmetics and Beauty Products
With variety retailing channels for cosmetics and beauty products, company could consider exploring multiple channels by
collaborating with existing players or engaging in retailing activities to tap into downstream opportunities.

Major Cosmetics Retailing Channels in Thailand

Department Store Specialty Store Supermarket/Hypermarket

Foreign Players (JV with Foreign Players (JV with Local Players Foreign Players
Local Players Local Players
• TOPs • Max Value (by Aeon)
• Central Group Thais) • Beauty Buffet Thais)
• Big C Supermarket
• The Mall Group • Isetan (Thailand) • Eve and Boy • Boots
• Tesco Lotus
• Siam Piwat • Bangkok-Tokyu • KARMART • Watson
• Makro

Convenience Store E-commerce

Local Players Foreign Players

Local Players Foreign Players (JV with • WeloveShopping • Lazada
• 7-Eleven Thais) • Tarad
• Mini Big C • Family Mart • Central
• Lotus Express • Lawson • SMEs from Facebook
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Cosmetic Sale Counters in a Department Store
(4) End Users

With large number of upper middle income family, beauty salons and numerous foreign tourist visitors, Thailand offers attractive
market opportunities for cosmetics and beauty products.

1 Upper middle income customers

with considerable growth 2 Foreign Tourists as additional
target group 3 Beauty Salon as end user,
influencer, and retailing channel

Income per Capita

30 million USD 1.4 billion
USD5,500 tourists/year market value

With above $5,500 income per capita,
Thailand has sufficiently high purchasing
power, creating market potential for high-end
cosmetics.
With approximately 48% foreign tourists
buying cosmetics, businesses could consider
foreign tourist as additional target group for
their products.
Beauty salons and spa could be considered as
influential end users, very useful as marketing
method as well as retailing channel.
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Table of Content

Market Opportunities

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Thailand’s Market - Overview

3.5 billion USD of Thailand’s market value of

cosmetics and beauty products in 2016

Facts about Thailand’s Cosmetic and Beauty Products Market

Thailand Market Value of Cosmetics and Beauty Products, as of 2016

Thailand is the largest market for cosmetics

1.1 billion USD in ASEAN.
Import
32%
Thailand is among the fastest growing
market in the world with 8% to 10% annual
growth rate.

Domestic
International brands are very popular
Production among Thais, including both domestically
68% produced foreign brands and imported
brands.
2.4 billion USD 11
Thailand’s Market for Imported Brands - Overview
Recently, imported brands have extraordinary high growth (16%-22%), especially skincare and make up, indicating high growth
potential for Thailand’s market expansion.

Import Value of Cosmetics and Beauty Products

1.1 billion USD Total Import Value Skincare Skincare
1
Import value 2015: Growth in import value
during 2012- 2015
48% USD 504 million 16%
Lip Make Up 2 Lip Make Up Growth in import value
Import value 2015: during 2012- 2015
Others
40%
Skincare &
Cosmetic
4% USD 47 million 22%
60%
Eye Make Up 3 Eye Make Up
Growth in import value

4% Import value 2015:

USD 42 million
during 2012- 2015
16%
Powders Powders Growth in import value
4
4% Import value 2015:
USD 39 million
during 2012- 2015
12
6%
Thailand’s Market – Business Landscape
Nevertheless, business landscape for cosmetics and beauty products market is considerably competitive, in which local brands
dominate low income segment and international brands dominate middle to high income segments.

Business Landscape of Cosmetics and Beauty Products Market in Thailand

Market Segment Low Income Group Middle Income Group High Income Group

• High exposure to local • Perceive that Korean and Japanese women have • Highly value for beauty and healthy skin
Customer media. Hence, often use flawless skin. Hence increasing popularity of with specific needs for skincare. Hence
Characteristic local movie stars/ idol as a Korean and Japanese brands. need to have beauty advisor (BA) to sell
selling point products.

Mostly local brands Japanese Brands Non-Japanese Brands Japanese Brands Non-Japanese Brands
• Mistine • Hada Labo • L’Oreal • Shiseido • Clarins
Key Players • Cute Press • KATE • Maybelline New York • SKII • Estee Lauder
• Tell Me • Canmake • Revlon • Three • Christian Dior
• Beauty Buffet
• Biore • Kose • YSL

• Hypermarkets • Cosmetic Specialty Stores • Department Stores (Cosmetics Sale

• Convenience Stores • Department Stores (Cosmetics Sale Counters) Counters)
Distribution Channel • Cosmetic Specialty Stores

E-commerce and online channels are suitable to reach all target groups. 13
Thailand’s Market – Recent Trends
Target customers consist of young and elderly populations; The young prefers whitening products and colorful make up, whereas the
old prefers anti-aging skincare.

Whiteness as the standard Wearing make up at Anti-aging beauty for Going natural as a
of beauty young age mature women growing trend

Potential Products: Potential Products: Potential Products: Potential Products:

o Whitening Skincare o Colorful Cosmetics o Anti-Aging Skincare o Herbal & Organic Skincare
o Sun Screen o Acne Skincare o Covered Cosmetics o Cosmetic for sensitive skin
o Brightening Cosmetics
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Recent Consumer Behaviors: Gen Y VS Gen X
Both gen Y and gen X in Thailand spend considerable amount of time on the internet; But they consume different media and use
different mobile applications.

Media Consumption Behaviors Gen Y VS Gen X

Gen Y
Born between 1981-2000
Most Popular Device
for Internet Access Mobile phone
Gen X TIPS for business
Born between 1965-1980
Mobile responsive website for products
1 introduction is necessary as both gen Y and
gen X access the internet via mobile devices.

Average Internet
Usage 7.6 hours/day 6.3 hours/day Choose appropriate social media for each

Most Popular Mobile

2 generation: Product review by blogger on
Youtube suit for Gen Y, whereas marketing
via Line is more appropriate for Gen X.
Application

Physical retailing channels are still necessary.

Popular Social Media Youtube, Facebook, Line, Instagram,Twitter
3 as online shopping has not yet become
popular in Thailand.
E-Commerce • Only 20.9% of internet users engage in online shopping
• Problems: Low creditability/reliability of online-retailers 15
Recent Consumer Behaviors: Shopping Mall as Urban Life Style
Regarding physical retailing channels, shopping mall is one of the
most effective retailing channel as it is the center of Thai urban
Restaurant & lifestyle, ranging from shopping, dining, studying, entertaining,
Cafe and healing.

Cram school Supermarket 2 types of shopping mall in Thailand

Hypermarket’s Department Store’s
Shopping Mall as the center of Shopping Mall
Shopping Mall
Thai urban lifestyle
Central Group, The Mall Group,
Big C, Tesco Lotus, Makro
Siam Piwat

Fashion &
Bank
Beauty
Target: Low – Middle Income Group Target: Middle – High Income Group

Retailing Channel: Retailing Channel:

• Cosmetic Section in Hypermarket • Cosmetic Sale Counter in Department
• Local SME Cosmetic Store Store
Home
Clinic appliances & • Cosmetic Specialty Store
Furniture 16
Success Case of International Brand in Thailand
With deep understanding of local needs and preference, firm can successfully create a
new niche market for its own products.

Hada Labo – Key Success Factors

• Understand local customer needs focusing on whitening products
• Utilize strong brand image of Japanese products as of premium quality
• Communicate with right target using Thai young superstar as presenters
• Successfully leverage online marketing to drive consumer recommendations for its products
• Choose appropriate distribution channel via Pharmacy & personal care specialty stores

Sale Promotion at Local

Specialty Stores, making
products more affordable

Japanese language packaging,

creating sense of premium
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Thailand’s Market Opportunities
To grab Thailand’s market opportunities, firms could engage in import, retailing & marketing activities, and collaborate with local to
distributors and retailers to reach nationwide customer, as well as expand into the GMS region.

1 Engage in import activities

2 Engage in retailing and
marketing activities 3 Collaborate with local
distributors/retailers 4 Expand into ASEAN
region

To penetrate into Thailand’s market,
firms can set up import subsidiary to
engage in import and distribution
activities.
To ensure successful market entry,
firms can engage in marketing
activities and secure retailing
channels (online/physical channel).
To reach nationwide customers,
firms can collaborate with local
distributors and retailers to scale
up distribution channel across the
country.
After getting familiar with local
market, expand into ASEAN region
is a good strategy, as Thailand is a
trend setter in its neighboring
countries.
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Recommendations for International Business
To successfully penetrate local market, firms should understand local preference, know local regulation, and find reliable local
partnership.
1 Understand local preference
The key for successful local market entry is to
understand local preference and willingness to
pay for product so that firm can set the right
price, choose the right product champion, and
form the right marketing strategy.
2 Know local regulations
Knowing local regulations allows firm to have
clear idea about all feasible forms of market
entry and strategic options, as well as, all
procedure need to be done to have present in
local market.
3 Find reliable local partnership
Finding reliable local partnership could be the
way to get local insight, secure distribution
channels, and overcome local regulation,
altogether.
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Doing Business in Thailand – Foreign Business Act

According to Foreign Business Act, foreign enterprises who cannot meet minimum capital requirement for wholesale and retail
business are prohibited to engage in wholesale or retail business unless they get foreign business license.

Foreign Business Act in Wholesale and Retail Business

Less than 50% considered as
share of capital
belong to foreign “Thai
individual/ juristic Enterprise”
entities

Import & Distribution Retailing

considered as

“Foreign Conditions CAN engage in

50% or more Conditions • Total minimum capital no less
of share of capital Enterprise” • Minimum capital no less import & distribution
than THB 100 million
belong to foreign than THB 100 million per and retailing
AND
individual/ juristic each wholesale location • Minimum capital of each store
Foreign Investment in entities and subjected to no less than THB 20 million
Retail Business
Foreign Business Act.
MUST get “Foreign
Otherwise Business License”
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Doing Businesses in Thailand – Wholesale & Retail Business
Foreign enterprises that cannot meet foreign business act’s conditions must apply for foreign business license. Even after getting the
license, foreign enterprises engaging in wholesale & retail business still cannot have land ownership. Hence, forming joint venture
subsidiary with local partner is one of the most advisable forms of investment in Thailand.

Import Distribution Retailing

Get Import License Get “foreign business license for wholesale

and/or retail business”

Register
“company limited”

For cosmetics and beauty
products, a company must
apply for import license at
Food & Drug Administration.
at Department of Business
Development,
Ministry of Commerce
Start
For foreign enterprise that cannot meet foreign “Import, Distribution, and
business act’s conditions for wholesale and/or
retail, a company must apply for foreign business
Retailing Business”
license granted by the Director General of the
Department of Business Development, Ministry of
Commerce and endorsement by the Foreign No land ownership
Business Committee. for foreign enterprise
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Table of Content

Investment Opportunities

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Why invest in Thailand?
With capability to meet international standard at low cost and abundance of local herbs, Thailand offers investment opportunities
as ASEAN’s cosmetic manufacturing hub.

1 Strengths as production base 2 Abundance of local herbs 3 Gateway to ASEAN market

With capability to meet international
standard at low cost, Thailand has strengths
as a production base of cosmetics in ASEAN.
Usually, Thailand exports USD 400 million of
cosmetics per year.
Thailand is blessed with local herbs, which
could be turned into more than 200,000
cosmetic ingredients e.g. pueraria mirifica
extract, mangosteen extract, coconut oil, etc.
As a trend setter of ASEAN market and the
regional cost effective manufacturer,
production in Thailand could serve as a
gateway to enter ASEAN market.
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Success Case of International Manufacturer in Thailand

Using Thailand as R&D and production bases are the key to

successful market expansion in ASEAN.

Biore: Kao Industrial

• Thailand is the only country in ASEAN that Kao invests in R&D
in consumer products.
• The company is successfully penetrate ASEAN markets.

Biore: Key Success Factors

• Understand local and regional preference, from long term footprints in
Thailand as well as role of Thailand as regional trend setter
• Engage in R&D, creating innovative skin care products that match with local
and regional customer needs
• Get synergy effect of sale, manufacturing, and R&D activities, by using market
insight for product development with low production cost 24
Success Case of Foreign Brand Co-Develop Products with Thai

Co-develop products with Thai partner is the fastest way

to gain local market insight, creating short-cut for
successful market penetration.

Faris by Naris: Japan-Thai collaboration

• JV between a Japanese cosmetic company (Naris Cosmetic
co,ltd) and a Thai cosmetic firm (Mistine Thailand) since 2013
• Focus on co-develop cosmetics that meet Japanese quality
standard and sell at reasonable price.

Faris by Naris: Key Success Factors

• Low production cost in Thailand, allowing firm to sell product at reasonable
price and reach mass target
• Utilize strength of local partner, securing both local market insight and
distribution channel
• Exploit strength of Japanese brand image, which is premium quality
products
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Thailand’s Investment Opportunities
To grab Thailand’s investment opportunities, firms could engage in cosmetic manufacturing, co-develop products with local, use local
OEM for contract manufacturing, and source raw material from local.

1 Engage Cosmetic
Manufacturing 2 Co-develop Products
with Local Firms
3 Use Thailand as
OEM Hub 4 Source Raw Material
Locally

To penetrate ASEAN market, firms
could consider invest cosmetic
manufacturing to ensure cost
effectiveness, proximity to regional
market and ease to gain local insight.
To ensure understanding of local
preference, co-develop products
with local is one of the best
alternative to secure local market
insight.
To utilize Thailand’s strength as
production base, firms could use
Thailand as OEM hub and get high
quality cosmetics at low cost.
To benefit from abundant local
herbs, firms could source raw
material from local in form of dried
herbs or herb extracts.
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Doing Business in Thailand – Cosmetic Manufacturing

Beside normal firm establishment and factory license application procedure, firm must apply for cosmetic manufacturing license
before starting production line.

How to start cosmetics and beauty products manufacturing in Thailand

“One Start One Stop Investment Center” can coordinate and organize all legal applications for foreign investors.

Register “company limited” Apply for “factory license” Apply for “cosmetics
at Department of Business at Department of Industrial manufacturing license” at Start production line
Development Works Food & Drug Administration

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Table of Content

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